Is Tesla a Promise or a Problem for Rebuilding the Middle Class?

Co-published by Fast Company
In Robert Jimenez’s day, California was second only to Michigan in auto manufacturing, and homeownership was a much more attainable aspiration. “We are what’s left of the middle class,” he says.

Can an industrial giant like Tesla be a factory for middle-class jobs?

Both Michael Sanchez and Robert Jimenez owe their fortunes to California’s auto industry. But their personal and professional trajectories couldn’t be more different.

Sanchez, a Tesla assembly line worker, is on a leave of absence due to chronic back pain from a repetitive-motion injury that sidelined him two years ago. He and his wife, Mona Liza Sanchez, rent a “very old broken-down” house in Hayward. Homeownership in Northern California’s pricey East Bay is not on his radar, even in this blue-collar suburb south of Oakland.

They lavish their affections on “our babies,” by which Sanchez, 39, means their cats and dogs. Their economic situation has caused them to delay starting a family.

Note: “Middle income” is defined as having household income that is two-thirds to twice the median household income for the county of residence.

Meanwhile, Jimenez, who retired in 2005 after 35 years at a Chrysler-owned supplier in downtown Los Angeles, owns a house in Montebello, just east of Los Angeles, and put his two children through college. His career flourished during the auto industry’s golden age, which began after World War II and was nourished by the federal government’s massive investment in road building. In Jimenez’s day, California was second only to Michigan in auto manufacturing, and homeownership was a much more attainable aspiration. “We are what’s left of the middle class,” he says.

Elon Musk’s labor intransigence could upend a decades-old social contract
between employers and workers.

Investment analysts scrutinized Tesla’s announcement, made earlier this month, that it met its 2018 production goals for the mass market Model 3, after the company blew past deadline after deadline. But another critical question looms for taxpayers who, according to a 2015 Los Angeles Times analysis, have invested nearly $5 billion in public aid to Musk’s companies. Can an industrial giant like Tesla be a factory for middle-class jobs – or has the very nature of manufacturing irrevocably changed since the 1960s, when Robert Jimenez first went to work in the auto industry?

Back then, more than 60 percent of California households could be considered middle income, according to Sara Kimberlin, senior policy analyst with the non-profit California Budget and Policy Center. By 2016, that number had dipped to below 50 percent. Some of the decline can be attributed to the loss of thousands of manufacturing jobs, many of them high-paying union jobs, like the ones that afforded Jimenez and his family a piece of the California Dream.

The 2010 opening of the Tesla plant in a shuttered Fremont auto factory gave hope to Sanchez, who, unlike Jimenez, went to school to study the auto trade. He was hired initially as a temp for $17 per hour in 2012. It took him three-and-a half years to earn his first raise, a feat he says he accomplished by sending emails to Musk, the human resources department and “everybody in between.” When he injured himself, Sanchez was making “$20 per hour and change” on the night shift. The starting wage at Tesla has since been raised to $19 per hour.

A successful California union drive could “serve as a model for jump-starting the middle class.”

By contrast, Sanchez’s wife, who is 40, had earned $34 per hour after five years of working on the assembly line at the same plant when it was unionized, according to Sanchez. She left the Fremont factory in 2009, when it closed. It had been operated by Toyota and General Motors in a joint venture.

An overriding concern of Michael Sanchez has been Tesla’s alleged lack of attention to safety. Sanchez worked on the luxury Model X’s underbody with his arms always above his shoulders, his neck straining as he looked up. Tesla should aim to “[make] it where people’s bodies are not going to break down as time goes on,” he says.

Sanchez fell back on a tried-and-true method of raising workplace standards. In the summer of 2016, he joined the United Auto Workers’ effort to unionize the Fremont factory, which currently employs 10,000 people and is California’s sole auto manufacturer. Plant safety is one of the UAW’s chief organizing issues at Tesla, which has received media attention for its higher than average rates of serious injuries, and for injury-reporting lapses, which the company disputes. A successful union drive could also “serve as a model for jump-starting the middle class” in California, according to Harley Shaiken, a University of California, Berkeley professor who specializes in labor and education.

“Imagine if Tesla goes under tomorrow — do you want to lose your job and lose your investment?”

In fact, labor advocates have long argued that unions benefit workers more broadly. A recent study, published by economists Henry Farber, Dan Herbst, Ilyana Kziemko and Suresh Naidu, draws from early polling data to show that high rates of unionization lead to lower levels of income inequality across the board. Shaiken also claims that the benefits of unionization would not just accrue to the workforce but to the company as well. A union could ensure that workers “speak more freely, more openly, now making things more effective in the production process,” he says.

Musk has not greeted the union effort warmly. In May, he wrote on Twitter: “UAW destroyed once great US auto industry & everyone knows it.” He also tweeted that those who joined the union might “give up stock options for nothing,” referring to an employee benefit currently available to all Tesla workers: an equity grant, which vests over a four-year period, and stock they can buy at a discount. The UAW charged that Musk’s statement was an act of retaliation against employees for union organizing and a violation of labor law, in a complaint filed with the National Labor Relations Board in May.

Source: Union Membership and Coverage Database, available at www.unionstats.com, compiled from the US Census Bureau’s Current Population Survey by economists Barry Hirsch of Georgia State University andDavid Macpherson of Trinity University.

Peter Leyden runs Reinvent, a media company that moderates roundtables with tech entrepreneurs and political leaders concerned about sustainability and the future of work. On the matter of compensation, Leyden suggests that having employees hold an equity stake in the company offers “a different way to think about your involvement at the company” that is “more geared toward the future” than bargaining for wage increases. The growing value of Tesla’s stock, Musk argued in a blog post to employees last year, can make its workers wealthier than their counterparts in unionized plants.

The path to the middle class is not as clear as it once was. The UAW has recently lost votes in right-to-work Tennessee and Mississippi.

Yet Jon Luskin, a certified financial planner at Define Financial, based in San Diego, believes employees are better off with higher wages than stocks. He urges Tesla employees to sell their stocks as soon as they vest. “Imagine if Tesla goes under tomorrow — do you want to lose your job and lose your investment?”

Shaiken says employees should not have to choose between unionization and having a stake in the company’s success. He points out that workers at General Motors, which is covered by a union contract, took home almost $12,000 extra this year due to a profit-sharing deal with the company.

Early last year Michael Sanchez was leafleting the Fremont factory as a volunteer UAW organizer when security guards ordered him to leave. One guard told him that “unions are worthless,” according to testimony that he provided to an administrative law judge during a trial before an NLRB-appointed judge in June, the San Francisco Chronicle reported. The NLRB’s general counsel says the company violated federal law that protects workers’ rights to act collectively. Hearings on the matter are expected to resume in September.

“If you’ve got a kid and mortgage and car payment, you need a predictable income.
That’s what unions do.”

“This has all the hallmarks of 1930s resistance, in the 21st-century context,” says Shaiken. He adds that such resistance could have “real consequences” beyond Tesla, upending a decades-old social contract between employers and workers.

“No one at Tesla has ever, or will ever, have any action taken against them based on their feelings on unionization,” Tesla said in a statement to the NLRB last year.

Of course, the path to the middle class that Robert Jimenez helped forge is not as clear as it once was. When he helped organize the Chrysler-owned auto parts supplier in 1968, union membership in the state stood at about 32 percent. Last year, only 16 percent of California’s workforce belonged to unions, and the union membership rate is far lower in the private sector. The UAW has recently lost votes in right-to-work Tennessee and Mississippi.

Peter Leyden characterizes unions as appropriate for 20th-century mass production, but anachronistic in contemporary high-tech manufacturing. He envisions a “new model” of labor-management relations that he describes as “flexible, adaptable, risk-taking” and “in sync with the entrepreneurial and innovative instincts of the people running the companies.”

But Nelson Lichtenstein, a UC Santa Barbara historian, argues that Musk is shifting risk onto workers rather than encouraging experimentation, since employees who feel less secure in their jobs will be reluctant to speak up. “If you’ve got a kid and mortgage and car payment, you need a predictable income. That’s what unions do,” he adds.

It is Musk and other union critics, says Shaiken, who promote false and outdated notions of auto unions, which often work collaboratively with the companies they represent. As an example, he cites the former General Motors and Toyota joint venture that previously ran the Fremont plant, where “constant improvement was the goal.” Tesla, he claims, is pursuing a “hard ideological argument rather than a pragmatic, high-tech way” of identifying how to optimize the production process and valuing workers at the same time.

“A competitive, profitable Tesla and a union are not incompatible, but that’s up to the workers there,” he says.